Question : In the case of fixed capital, partners will have
Option 1: credit balance for their capital account
Option 2: debit balance of their capital account
Option 3: credit and debit balance in their capital account
Option 4: credit balance or Nil balance in their capital account
Correct Answer: credit balance or Nil balance in their capital account
Solution :
Answer =
credit balance or Nil balance in their capital account.
If capital is fixed, the partner's capital is always credit balance or Nil balance. All adjustments regarding interest on capital, interest on drawings, and profit are transferred to the current account. This balance represents their initial investment in the partnership and any additional contributions made over time, resulting in a favourable net capital position.
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